TCS high on global delivery

Ranjit Shinde & N ShivapriyaApr 17, 2007, 12.50am IST

MUMBAI: Major IT companies continue to impress with their FY07 show. It was only last week that TCS' rival Infosys had posted a 3% growth in revenues and 16% jump in its net profit on a sequential basis, also beating street expectations. However, it was inclusive of a one-time gain of Rs 124 crore on tax reversals.

For FY07, TCS recorded a 41% growth in software revenues at Rs 18,685 crore and a 42% jump in net profit at Rs 4,212.63 crore. "TCS' robust business model using our full-services play and global delivery network model have given us pole position to capitalise on the strong demand environment that exists globally," TCS CEO and MD, S Ramadorai, said. It has taken a forex cover of $1 billion at Rs 43.50-44.

The company is banking on its ability to deliver on large and complex engagements, cross-selling and on the full-services model to ramp it up. Of the 12 over-$50 million deals the company signed in FY07, five involve full-services play comprising IT, BPO and infrastructure services.

High growth business lines such as consulting, BPO, infrastructure services, and assurance and testing have also gained critical mass, accounting for 18% of its revenues or $800 million. TCS added 43 new clients during the quarter under review and 218 during the full fiscal.

"We are seeing good demand environment across geographies and a demand for technology-led solutions for global customers," Mr Ramadorai said, who sounded optimistic of the firm's FY08 performance. The management also said its business did not feel the impact of the slowdown in the sub-prime lending space in the US.

Given the upward trend in the rupee against the dollar, the company's geographical mix looks more attractive as the share of revenue from North America in FY07 dropped to 52.3% from 56% a year ago. Also, its presence in the UK market grew from 15.2% to 20.3% by similar comparison in terms of revenue share. This makes the company less vulnerable to weakening dollar compared to its peers who derive more than 60% revenue from the US market.

In case of domain-wise growth, BFSI continued to be a major revenue driver in FY07 following manufacturing and telecom. However, in the case of latter two segments, operational focus is gradually tilting from manufacturing to telecom. The share of revenue from manufacturing reduced from 17.2% to 15.3% whereas telecom witnessed a rise from 15.1% to 17%.

The company added 32,000 employees to its payroll taking the total headcount to 89,419 by the end of FY08. And even though attrition rate gradually crept up from 10.6% in Q1 2007 to 11.3% to Q4 2007, it was far less than that of its peers. It has made 12,000 offers on campus for FY08. Wage hikes in India for FY08 will be 12-15% and overseas, 3-5%.